Washington: US sanctions experts indicate that the Trump administration's latest attempt to economically isolate Iran could be a significant escalation, contingent on Washington's willingness to follow through with its threats. US Treasury Secretary Scott Bessent announced Operation Economic Outcast on August 24, aiming to force Iran's trading partners to choose between ties with Tehran and access to the US financial system.
According to Radio Free Europe Radio Liberty, Bessent's announcement lacked immediate measures, leaving an open question about whether Washington is prepared to target major Chinese financial institutions critical to Iran's revenue. Such actions could provoke a response from Beijing, potentially reigniting a trade war ahead of Xi Jinping's planned visit to Washington on September 24.
Former US Treasury official Michael Parker suggested that Bessent's remarks were intended to pressure foreign governments and warn them, rather than announce immediate sanctions. Parker emphasized the importance of implementing more comprehensive actions against major banks to bolster the campaign's credibility.
The US has extensive experience with sanctions on Iran, which has adapted through various channels to evade restrictions. While the administration claims to have identified the networks facilitating Iranian oil transactions, experts highlight the difficulty of closing the gap involving China.
Bessent stated that entities dealing with Iran would face US sanctions if they didn't sever ties. He emphasized that no one is above US sanctions, particularly pointing to China's significant role as an Iranian oil buyer. The question remains: what will happen if Washington sanctions a major Chinese financial institution?
Max Meizlish, a research fellow at the Foundation for Defense of Democracies, noted the importance of combating China's role in facilitating funds to Iran. He mentioned Chinas Bank of Kunlun as a likely target for sanctions, with potential pressure on its parent company to cut ties.
Chinas embassy in Washington argued that sanctions would not resolve the Iran issue and called for political and diplomatic solutions instead. Meanwhile, Bessent indicated that President Trump was urging world leaders to cease interactions with the Iranian government.
Jim Mullinax, a retired State Department economic officer, highlighted the potential consequences of targeting Chinese banks, depending on the institutions involved. He suggested that Washington could target specific banks without disrupting the global financial system, though any action could provoke retaliation from China.
Mullinax defended the logic of issuing warnings before imposing sanctions, allowing for diplomatic solutions. However, Meizlish suggested that the warnings might also prepare financial markets for potentially disruptive actions, given the existing global trade disruptions and market volatility.
The administration's goal is complete economic isolation of Iran, but experts point to a more complex measure of success. Mullinax suggested that the ultimate objective is to bring Iran back to negotiations to address regional security issues. However, sanctions could have unintended consequences, such as affecting global energy markets and the availability of essential goods for Iranians.
The fundamental uncertainty of Operation Economic Outcast lies in whether economic pressure can yield political concessions from Iran. If Iran continues to find ways to evade restrictions, the US may need to confront major Chinese financial institutions, potentially escalating the campaign into a broader US-China economic confrontation.